Forum Archive Index - October 2001

["dsproul" <dsproul@corsairmarine.com>]

Jefley,

 

John Wedde answered your query on the tax position well, I think.

 

Just wanted to throw in a few short comments on investing/trading. Not all readers of this forum will agreewith everything , but here goes:

 

In my short experience, there are at least three kinds of "buys"

 

1. Long term investments;

2. Short term trade opportunities;

3. Mistakes.

 

1. Most of my buys are with a view to long term hold either for dividends , or share price growth, or both.  Actually CLI comes into this category.  I had done the research and followed the comments in this forum, and last weeks fall seemed to present a good buy opportunity. Possibly some current holders took the opportunity to ADD to their holdings.

 

    I try to invest in companies  which satisfy four criteria:

 

       -Strong  in their particular field- core business sound.

       - Good, sound management, and impressive projection to the public

       - Look good for continuing earnings growth

       - AND most importantly -  a strong balance sheet ( low debt, good working capital ratio, for starters).

 

    Once these criteria are satisfied, for me it is a matter of whether the share is at a price I consider reasonable with respect to earnings..  For example Baycorp probably     satisfies all four of the above criteria, but at $12.00, its PE ratio is too high for me, suggesting share price growth may be limited .

 

    Within this category , the right is reserved to exit a "long term" holding if any of major fundamentals change.  For example , a NZ importing company looks good             when the NZ dollar buys 65 US cents, but not when it buys only 40 US cents.  EBOS is  a company that is adversely affected by  the low NZ dollar, (although it has         managed to maintain its earnings reasonably well, it would benefit greatly by a higher NZ dollar)

 

 

2. Often there are "situation" stocks that present a good trading opportunities.

 A recent example was PMP.ASX which plummeted from over  a dollar to under 40 cents on an announcement of a profit downgrade.    To me this seemed  an oversell situation , and although  I did not like the long term prospects  of PMP, I bought a few shares at 41 cents and sold at 52, when the price bounced back.

 

3.  Yes , there are times when the emotion of the moment overcomes one and a "mistake" is made. Purchased Affco earlier this year on rumours of takeover,  Within 24 hours was regretting my rashness, and sold out without damage.

 

Having said all that , as of today my transactions/investments are in the red by 2.88% this year, including dividends.  Reasonably happy with that in view of the events that have occurred.

 

Regards,

Dave

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